ReEnergy chief warns biomass plant could close in 90 days

A load of wood chips is unloaded in 2012 at ReEnergy Lyonsdale’s cogeneration plant on Marmon Road in the town of Lyonsdale. Watertown Daily Times photo.

LYONS FALLS — Without a power purchase agreement, the ReEnergy Lyonsdale wood-chip-burning cogeneration plant could close in 60 to 90 days, according to company CEO Larry D. Richardson.

Operating at a loss because of low energy prices, the 22-employee plant on Marmon Road in the town of Lyonsdale will need to find a solution to stay open, Mr. Richardson said. One solution would be to establish a new energy contract with the state.

Mr. Richardson said employees at the 22-megawatt plant, along with loggers, were informed this week that the plant could be in its “final inning of activity.” He said the plant indirectly supports more than 100 jobs in the logging industry and has an annual economic impact of $15 million to $20 million. ReEnergy does business with 52 loggers in the north country.

Mr. Richardson said possible closure comes as wholesale energy prices have plummeted by about 40 percent over the past year.

“Last year at Lyonsdale we lost well in excess of a million dollars, and that is not a sustainable business. Either we identify a solution in the very near future, or we’re going to be forced to shut down,” he said, likening the situation to the 2012 closure of the company’s 21-megawatt plant in Chateaugay.

Representatives from the Wladis Law Firm, East Syracuse, were hired recently by the company to lobby for a solution to save the plant, which opened in 1992 and was bought by ReEnergy in 2011 from Central Hudson Enterprises Corp., Poughkeepsie.

Solution in sight

A solution could be in sight to save the plant.

Mr. Richardson said ReEnergy is busy talking with a network of state-run institutions, which he declined to identify, that could purchase power from the plant. The institutions also could buy excess electricity generated from the company’s 60-megawatt Black River biomass plant at Fort Drum that isn’t sold to the Army. But those discussions haven’t yet been fruitful, he said.

Because the Army purchases only 40 percent of the plant on post, that facility is also operating at a loss, albeit a small one.

The plants could be bailed out temporarily, he said, if the state Public Service Commission allows it to sell more renewable energy credits than it already does to the New York State Energy Research and Development Authority. Such a deal would provide temporary relief.

In November 2014, the PSC approved a three-year extension to the company’s seven-year contact with NYSERDA, enabling it to continue selling energy credits. But Mr. Richardson said while that contract had increased pricing for credits, “it was much less than we requested … we’ve continued to operate the facility, but wholesale energy pricing has continued to decline.”

He said ReEnergy has estimated that a state investment of about $3.2 million would cover the plant’s expected deficit through 2017, until the state’s Clean Energy Standard is established. Gov. Andrew M. Cuomo has called on the PSC to develop that standard, which would mandate that 50 percent of all electricity consumed in the state by 2030 come from renewable energy sources.

Mr. Richardson said a clean energy plan being developed by the state calls for a better market structure for selling renewable energy credits.

“The structure could better sustain operations of facilities like Lyonsdale, but that’s a couple of years away,” he said. “We need to bridge this gap now.”

On March 1, ReEnergy will decrease the price it pays loggers for wood chips by roughly 20 percent. Mr. Richardson said the move will cover only a small portion of the plant’s operating deficit.

ReEnergy said its Lyonsdale plant supports loggers by spending about $6.5 million annually on more than 200,000 tons of wood chips.

The Lewis County Board of Legislators is pushing for a solution to keep the plant open, according to Legislator Roscoe K. Fawcett Jr., R-Lyonsdale. He said the legislature plans to soon contact Gov. Cuomo and U.S. Sen. Charles E. Schumer, D-N.Y., about the urgency of the matter.

Mr. Fawcett said he hopes that Gov. Cuomo could spearhead a plan to provide $3.2 million needed for the plant to stay open for two years. Given the governor’s ambitious renewable energy goals, “how could he afford to have ReEnergy close? It seems like he would want to do everything in his power to keep it open,” he said.

It is possible the plant could close for two years and reopen when market conditions improve, Mr. Fawcett said. But doing so would force employees and loggers to look for other work.

“A lot of (the loggers) are mom and pops,” he said, “and my guess is they would go out of business.”

Gregory C. Hemmerich, owner of Hemmerich’s Tree Service in Lowville, said that ReEnergy will drop the rate it pays loggers at its Lyonsdale facility to $21 per ton on March 1 — about $5 per ton less than most loggers are now paid. The rate at its Black River plant, where Mr. Hemmerich also delivers wood chips, won’t be changed.

If the Lyonsdale plant shuts down, Mr. Hemmerich said, his five-employee business and many other logging operations would be compelled to deliver all of their wood chips to the Black River facility. And, he said, the Black River plant probably would have to further restrict the number of loads loggers can deliver.

“I’ll still be good if the Black River plant stays around, but closing the Lyonsdale plant would hurt us,” he said. “We’re now doing 25 to 30 loads a week, and they could knock me down to a much lower quota.”

Mr. Hemmerich predicted that about 20 loggers could go out of business if the Lyonsdale plant closes. He said loggers have crews ranging from four to a dozen workers.

“It’s going to hit over 150 people who work in the woods, and it’s going to hit spending at stores and restaurants,” he said. “If it’s only going to cost $3 million to have that kind of business around, I’d like to see the state pony up.”

Lewis County Manager Elizabeth Swearingin said the plant’s closure would “have a significant burden on the local economy.”